STATE OF THE NATION 2019- the view from the top - Hardware Journal
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
state of the nation 2019
STATE OF THE
In our annual “state of the nation”
survey, we find out what’s new with the
– the
DIY and home improvement retailers
and builders’ merchants and seek their
outlook – and plans – going forward.
Steve Bohling reports.
22 NZHJ | APRIL 2019 MORE AT www.hardwarejournal.co.nz
state of the nation 2019 NATION 2019 view from the top MORE AT www.facebook.com/nzhardwarejournal APRIL 2019 | NZHJ 23
state of the nation 2019
IF YOU WANT to find out what’s going on, you go straight to growth to return to more modest levels after the very strong
the top. performance of the past few years.
In this respect, four out of a possible six “captains of industry”
in the New Zealand DIY and home improvement channel Matthew Washington: We’re continuing to see sustained
agreed to take time out and answer the same questions: volumes in the construction market for the foreseeable future,
• Toby Lawrance, GM NZ of Bunnings NZ as there is still a fundamental need to meet underlying demand
• Darrin Hughes, CEO of ITM for housing in New Zealand, despite slower growth in building
• Matthew Washington, Acting CEO of Mitre 10 NZ consents for residential.
• Bruce McEwen, Fletcher Building’s Distribution division But we’re not a market in isolation, so we are keeping a
Chief Executive for PlaceMakers & Mico. watchful eye on the macro global economic indicators and
In case you’re wondering I also invited Mike Guy at Carters headwinds facing key markets around the world.
for his comments (request politely declined) and caught up The most concerning is the recent downturn in Australia
separately with Kevin Marevich to talk about BuildLink in where building consents have declined significantly.
what’s developing into something of a “watershed year” for the While our New Zealand economy is still going relatively well,
co-op (see page 6). we are mindful of these headwinds and the potential impact they
As well as posing the same questions of all our captains may have on our economy in the future.
of industry, I also compiled a snapshot of their latest news,
financials and network status, which you can see around this Bruce McEwen: Overall we see it as a reasonably supportive
article. market. Consents are strong but growth is moderating.
What do they have in common? I think there are a couple of issues here. It’s hard to get
What stands out as points of difference? consistent growth on growth because you run out of resources –
Let’s kick on. you know we have challenges around having enough qualified or
tradespeople to actually build everything that can be consented
What is your outlook for the and there are challenges around the amount of buildable land
next 12 months? that you’ll see coming available in New Zealand. And on top
of that, councils and consenting authorities have their own
Toby Lawrance: We are really pleased with our performance challenges.
and still see a lot of opportunity for future growth, including All this will of course differ quite a lot geographically. There
continuing to invest in regional communities along with are certain markets which are clearly strong at the moment and
upgrading and expanding our store network. others which are a challenge – the likes of Christchurch etc –
We will continue to adapt to suit the demands and needs of and will continue to be challenged for some time.
our customers with a strong focus on delivering great value,
backed up by the best service from our team. What are the biggest factors that will
For our team, it’s about making sure they have the right influence the success or failure of your
training and development opportunities so that they can business during this period?
continue to learn and grow with us and offer them long-term
career opportunities. Toby Lawrance: The retail landscape is changing and evolving
all the time.
Darrin Hughes: There certainly seems to be some concerns Our focus must remain on ensuring that we are adapting and
from economists in the market around the main drivers of continually thinking about the needs of our customers.
migration, affordability, land availability and Government We want to make sure every customer experience with us is
policy but, as of yet, that hasn’t flowed through to a flattening of easy and that we are offering genuine convenience and choice.
demand.
Our members are continuing to see strong underlying Darrin Hughes: The most common issue facing our members
strength in builders’ forward order books. The underbuilding is the scarcity of labour, more specifically, quality labour.
of houses and the relative scarcity of quality labour resource Several of our larger operations are at or near capacity, mainly
means that there remains a significant tail wind – particularly in due to the challenge in attracting and retaining staff whether
Auckland. that be for frame & truss plants or stores.
Overall, in the coming financial year, we expect sales While KiwiBuild continues to meander along, seemingly going
24 NZHJ | APRIL 2019 MORE AT www.hardwarejournal.co.nz
state of the nation 2019
“Our focus must remain on
ensuring that we are adapting and
continually thinking about the
needs of our customers”
nowhere fast, we are seeing much more promising activity in the
social housing area.
Matthew Washington: The biggest factor is to simply continue
to do what we do well – delivering great customer experiences
across all segments.
Another factor will be how we respond to the rising costs of doing
business across the sector – in particular, employment costs.
We are focussing on developing efficiencies in our operations
through significant investment in technology, and prioritising
our customer facing staff to retain that exceptional customer
service.
It’s important we continue to adapt to the rapidly changing
retail and digital environments, particularly with the entry of
digitally savvy millennials into the market.
BUNNINGS NZ
Toby Lawrance, GM NZ
Bruce McEwen: For me it’s always people and culture. There
are lots of little drivers or triggers that influence success but BUNNINGS IN NEW Zealand had another good year
it always comes back to people and culture and I think we are last year with double digit top and bottom line growth.
pretty strong on both those counts. In terms of e-commerce, with Bunnings Australia
The other thing that’s critical is delivering to customers’ needs announcing firm plans to go live within the next 18
and they’re ever-changing so that’s really critical for success.
months, it’s clear we’ll see the New Zealand arm
If you look at compliance and you look at the challenges
follow suit, possibly sooner than later.
around logistics, supply chain, those sorts of things, just
paperwork even, anything can you can do to make it simpler After all, it’s now armed with the extra capacity of
and ultimately save time – which is one of the biggest costs in its new Auckland DC and, with self-checkout set to
the build process that often gets overlooked – wherever you can be rolled out in selected branches, staff will have
take time out of the build process, you’re adding value for your additional time to pick online orders from the shelves
customers. (see page 40 for more on this).
Which key aspect(s) of the business will be
your main focus in the next 12 months? SNAPSHOT – BUNNINGS NZ
Gross revenue last full year: $1.2 billion (+11.2% for year
Toby Lawrance: We’re always focussed on expanding our ended June 2018)
product range to bring new, innovative products to customers, Gross Profit last full year: $372.7 million (+10%)
including growing categories like Smart Home.
Trade % of top line: 50% (est)
We will also continue to improve the efficiency of our
Bunnings Warehouse stores: 27 (-)
distribution and delivery systems to help our stores better serve
Bunnings small format stores: 20 (-)
our customers.
We are also committed to continued exploration of online Bunnings Trade Centres: 8 (-)
opportunities and seamless transactions.
MORE AT www.facebook.com/nzhardwarejournal APRIL 2019 | NZHJ 25
state of the nation 2019
In the future, we will be introducing self-checkouts into some
of our bigger stores like Manukau, Botany and Riccarton, as well
as including them where it makes sense in our new store builds.
This will provide another convenient option for customers as
we continue to look for ways to make their experience with us as
easy as possible.
“The most common issue facing our
members is the scarcity of labour, more
specifically, quality labour”
Darrin Hughes: We’ll look to further develop our brand – with
94 stores throughout the country we know ITM is the preferred
merchant for the small and medium builder segment.
We will be driving a greater connection with them in helping
develop their businesses through professional and social
opportunities.
Matthew Washington: Continuing to grow our retail footprint
so that we remain highly accessible to our customers, as well as
ITM growing our core retail and trade businesses, and evolving our
Darrin Hughes, CEO online offering.
We are building out our in-store experience with our
THIS TIME LAST year Darrin Hughes talked about showrooms – with a focus on providing services in these key
injecting more operational discipline into the ITM categories.
network. What’s progress with this?
“We’ve been able to look at data to better Bruce McEwen: The biggest thing is always deliver the
understand store performance and areas of fundamentals, every day – that’s what the customer expects of us.
development for the co-operative. Digitising our customer facing branch processes is a big driver
“Ultimately, this will translate into a larger for the next 12 months and that’s largely about really delivering
technology solution for our network to give us insights a better customer experience, making it more efficient … getting
on our customers’ behaviour. customers in and out of the branch quicker and easier.
“One key advantage this has given us is the ability But first we’re going to transform our delivery capability. So
we want to bring a whole new level of service to delivery... Think
to better provide a nationally consistent offer to large
Uber, if you like – the Uber of the delivery of product is where
volume housing companies including consistent
we’re looking to go.
pricing through our stores and common standards of
Just imagine if as the builder you could see where the truck
operation to meet their needs.
was and when it was going to arrive? You’ll see that rolled out
“Already this is translating into a much higher level
through this year.
of interest from this customer segment in developing
You’ll also see us in-source a chunk of our freight. I just think
supply terms with ITM.”
delivery is a core competency, something which we should be
good at and so we’re going to be.
SNAPSHOT – ITM Ultimately we need to work out how we connect with our
customers digitally, be that information price, invoicing... Now
Gross revenue last full year: N/A
the real ambition for us is how do we connect into their world?
Stores: 94 (+4) Think of the Air New Zealand app and how they get inside
your world – that’s a space we need to get our business into...
26 NZHJ | APRIL 2019 MORE AT www.hardwarejournal.co.nz
state of the nation 2019
Which will be your “hero” categories in the
coming year – any changes?
Toby Lawrance: We are very excited about our Clever Living
range [fully specified prefabricated homes delivered to site].
This is an innovative product that provides a simple and
affordable solution for New Zealand customers.
With the current housing shortage and rising prices, pre-
fabricated houses are growing in popularity and our Clever
Living product provides a low cost solution to cater for that.
Darrin Hughes: We’re not concentrating on specific hero
categories; instead we’ll be focusing on cementing our
relationships with key suppliers to provide a high quality and
cost effective ranging to meet our customer’s needs.
We want to be at the forefront of contributing to innovation
development with our suppliers by providing genuine customer
insights to help them tailor their offering to our local market.
“We are focussing on developing
efficiencies in our operations through MITRE 10 NZ
Matthew Washington,
significant investment in technology, and Acting CEO
prioritising our customer facing staff”
GROWTH MAY BE slowing but demand is sustained
says the Acting CEO, with more than half an eye on
Matthew Washington: As New Zealand’s largest garden sharpening processes and increasing efficiencies
retailer, we are seeing investment across several stores to grow faced with rising costs.
or improve their garden centres, ensuring customers have the Employment costs in particular are driving
best range and an even more enjoyable experience in-store. “significant investment in technology”, he says, which
Our growth in trade in recent years has placed increasing will allow customer facing staff to maintain the quality
demand on our building supplies and timber categories, of customer service.
necessitating considerable investment across our stores in There are also prospects for further developing
expanding the footprint of trade, to accommodate the needs of the idea of in-store showrooms around the Mitre 10
our trade customers. network, encouraged by positive results from last
Finally, alongside our kitchen and bathroom categories, year’s kitchen and bathroom showroom upgrades.
outdoor furniture continues to go from strength to strength as The latest in this vein has been a successful Colour
people continue to look at making best use of their homes – Centre pilot with a broader rollout due this year.
particularly their outdoor areas.
Bruce McEwen: Not really, our core trade categories are our SNAPSHOT – MITRE 10
heroes and will remain so. We do however see opportunities in
Gross revenue (total Group sales) last full year: $1.5 billion
heating, kitchens and bathrooms.
(+7.1% for year ended 30 June 2018)
We are also making strides on installed solutions – installed
Mitre 10 MEGA stores: 41 (-)
roofs, installed slabs, those sorts of things – providing solutions
Mitre 10 stores: 42 (+2)
for our customers and again taking away some of that risk and
complexity. Hammer Hardware stores: 44 (–4)
Then there’s manufacturing – the traditional house and
MORE AT www.facebook.com/nzhardwarejournal APRIL 2019 | NZHJ 27state of the nation 2019
traditional frame & truss. What’s next in that space? Most important to this is working with trusted suppliers and
I’m not suggesting pre-fabrication, that’s a whole different industry bodies, ensuring we are quality checking our stock,
ballgame, but there are components of a house that you can and having expert resource dedicated to product compliance
manufacture offsite, frames as well as other components of the internally.
build process, and I think that’s something you’ll see us do more We are always reviewing any new information or research
and more of going forward. about products that we stock or any feedback we receive from
Obviously floors and mid-floors, roof cassettes … are obvious customers to inform any action we may need to take.
extensions of our fame & truss manufacturing capability. So
that’s where we will look to direct our attentions. Bruce McEwen: We have pretty stringent QC processes to
ensure whatever we import under another brand or put under
There have been several instances of our own brands meets the appropriate standards.
non-compliant or poor quality materials We do and we’ll continue to stand behind everything we sell
being imported into New Zealand and sold and deliver …
via some merchant channels. What steps It’s about the level of warranties [and] quality assurances
are you taking to protect your customers businesses are prepared to give the products they sell.
from this risk?
Can you tell us about future new members or
Toby Lawrance: We take our commitment to product quality store openings?
seriously and all of our products meet strict New Zealand
standards. Toby Lawrance: We’re excited to be opening our new Westgate
We work really closely with our suppliers on this and have and Christchurch Airport stores in the near future, with
robust procedures and processes in place, regardless of where Westgate set to be our largest Warehouse in New Zealand.
the products are sourced, to ensure they are safe, compliant, and Whanganui will follow not too far behind. As with any store
fit for purpose. opening, the end result is a real testament to the team, our
We remain very committed in this area and will continue to suppliers and support functions all working together to make it
work with all of our suppliers and stakeholders. happen.
I am super keen about our future new store opening pipeline
Darrin Hughes: We have been working with all our major and store upgrade plans.
suppliers to confirm source of origin on all products and validating
their quality regime to ensure source factories are providing Darrin Hughes: There are a number of proposals for new stores
continuous compliance with New Zealand standards and practices. being evaluated as we seek to provide the most comprehensive
We’re aware that there have been instances of products being trade network in New Zealand, so watch this space.
supplied from traditional suppliers that have been sourced from Over the past year, our members have made significant
overseas factories that do not meet our standards. investments in their businesses to expand premises, relocate to
As some customers and merchants continue to drive new premises or expand their networks.
price based offers, there is an increasing risk of quality being Examples include new stores being constructed in Taupo,
compromised or short cuts taken to achieve volumes. Tuakau, Masterton, Mangawhai and Alexandra.
We see increasingly that the responsibility of ensuring non-
compliant products not entering the supply chain will fall to the Matthew Washington: The Mitre 10 cooperative is
merchant. constantly growing to serve our customers better and in more
Our expectations on our supplier partners have increased communities around the country.
accordingly as we seek greater transparency of product origins. While I can’t give away too much, we have our eye on several
locations for new stores, including land we have purchased
Matthew Washington: We pride ourselves on delivering in two major growth locations for future development
quality home improvement and building materials that New opportunities.
Zealanders can trust We are seeing some great growth across the network, with our
We take great care in ensuring our products are not only safe Members investing in expanding the footprint of their stores,
and compliant but are fit for purpose and help our customers get and some making the transition from Mitre 10 to Mitre 10
the job done right. MEGA, or from Hammer Hardware to Mitre 10.
28 NZHJ | APRIL 2019 MORE AT www.hardwarejournal.co.nzstate of the nation 2019
“We want to bring a whole
new level of service to delivery...
Think Uber, if you like…”
We will also be opening a new Mitre 10 Gisborne and
Hammer Hardware Wellsford before the end of the year, and
both stores will bring new Members into the cooperative. In
addition, in Beachlands we will see the local Hammer Hardware
reopen as a Mitre 10 around Christmas time too.
Bruce McEwen: We just opened a standalone Mico in
Motueka. We obviously already have a PlaceMakers in Motueka
but it was going so well we couldn’t squeeze a Mico in – that’s a
good problem to have!
The new PlaceMakers in Rotorua is now painted blue and PLACEMAKERS & MICO
we’ve also rebuilt and refurbished branches in Timaru and Bruce McEwen,
Oamaru. Fletcher Building Distribution
But we’ve created a pretty strong network so across 130 Division Chief Executive
locations we don’t have too many places that aren’t covered.
DESPITE APPARENTLY MARGINAL gains at the top
We also have two new JVs since Christmas. Thames went
and bottom lines in the last FY, PlaceMakers & Mico
into JV just recently as did Hutt City both with longstanding,
still sees the marketplace as “reasonably supportive”,
experienced PlaceMakers operators. So the JV model is alive and
even if softening around the regions.
well I guess...
Still, Fletcher’s two distribution banners are on the
Fundamentally, the mixed ownership model makes sense in
front foot and taking significant measures to ensure
certain locations with the right people in the right place. It works.
their trade offering remains top of mind.
And look, not everybody wants to be a JV, so that’s fine too.
Among these are aspirations to offer customers
Some people are very happy leading the business and not having
ever-higher levels of real-time information and
an investment interest.
communication and more digitised touchpoints so
And that’s just fine with us. Horses for courses.
builders and tradies spend less time off-site.
More installed solutions from the blue barns would
As you can see from the above, all of our players are addressing
also be a reasonable bet in the bid to up their trade
rising costs – and not just their own costs but those of especially
customers’ productivity.
their time-poor trade customers.
Set against this is the backdrop of a continued elevated level
of demand – not one of our players is talking about cutting back SNAPSHOT –
their store networks – even as growth continues to moderate. PLACEMAKERS & MICO
So they’re not only super-busy but they’re also seeking to offer
Gross revenue last full year: $1.5 billion
more – more convenience, sharper pricing and better levels of
(+1% for year ended 30 June 2018)
service.
Trade % of top line: 95%
No surprise then that our retailers and merchants are almost
Operating earnings last full year: $104 million (flat)
without exception talking about introducing new ways of
PlaceMakers stores: 62 (+1)
working and greater efficiencies, both to mitigate costs and
Mico branches: 66 (+1)
leverage and differentiate their brands.
PlaceMakers-Mico colocations: 9 (-)
Next time, with the prospect of Bunnings joining Mitre 10 in
the local e-commerce arena, it will be interesting to see what PlaceMakers-Mico shared sites: 3 (-)
effect online is having on the hardware channel…
MORE AT www.facebook.com/nzhardwarejournal APRIL 2019 | NZHJ 29You can also read
